Navigant Research Blog

Much talked about in the energy efficiency sector, the Internet of Things (IoT) refers to a world where everything from lamps to HVAC systems to entire grids will one day be connected. The concept has gained traction in recent years, but deployments remain modest. Only an estimated 1% of the world’s buildings use systems to control and network lighting, and only 7% of commercial building lighting is operated using smart controls.

However, controls products offer huge energy consumption savings opportunities. Enlighted Inc., one lighting controls vendor, claims that its wireless sensor system can cut commercial building energy consumption by 50% to 75%. In an environment where healthcare costs are predicted to increase by 6% annually for the next decade and uncertainty lingers concerning the Affordable Care Act, cost-savings opportunities like that are enthusiastically welcomed.

Update Needed

In the healthcare sector, IT investments increasingly emphasize connectivity and networked systems. Networking enables healthcare systems to lower costs while improving patient experiences and facilitating an advanced degree of care customization. Particularly in the United States, where the cost of patient discharge is about $18,000 (versus $6,000 in other developed nations), networked systems can dramatically cut administrative costs.

One of the greatest benefits is the ability to test and diagnose devices remotely. This can help to reduce device downtime and avoid unexpected breakdowns, thus avoiding shutdown costs and patient rescheduling. Connected devices, such as MRIs, CT scanners, and lab test equipment, can signal when critical operational components are being depleted.

Efficient scheduling is another benefit of IoT technology in healthcare facilities. By leveraging utilization statistics, hospital employees are able to optimize equipment use and avoid over-scheduling procedures.

Seeing the Patterns

The expanded capabilities of smart, connected products and the data they generate are becoming necessary in the increasingly competitive healthcare sector. In addition to cost-cutting benefits, the IoT is opening extensive opportunities for improved operational efficiency and patient satisfaction. This emerging Internet of Healthy Things is composed of apps and hardware that promote positive health outcomes and focus on preventive healthcare for individuals. For example, Fitbit’s wearable device captures health-related data, such as sleep patterns, activity levels, and other personal metrics, to provide a complete picture of behavior and baseline vital signs. Medical device companies offer home health-monitoring systems that allow physicians to remotely monitor their patients’ clinical status. For example, Propeller Health’s asthma and chronic obstructive pulmonary disease (COPD) tracker allows a doctor to remotely monitor patients’ symptoms. Other apps exist to monitor a range of other health issues, including diabetes.

Although the healthcare sector has been traditionally slow to embrace new technology, the IoT offers improvements for both facility management and individual patient care. As tele-health and other in-home care options continue to expand, IoT-enabled devices can enable progressive hospitals to remain competitive—and improve outcomes.

Last month, the Chinese Ministry of Commerce announced that it would remove export quotas and other restrictions on rare earth minerals as a result of a 2013 World Trade Organization (WTO) ruling. The case, brought by the United States and other trade partners, asserted that China’s export quotas violated trade rules. China has limited rare earths exports since 2010, when the Chinese government imposed a strict export quota on rare earth elements. At that time, China held approximately 95% of the world’s supply of rare earth elements. The predicted shortage caused prices to skyrocket, and in just 12 months, the cost of some materials used in lighting saw increases of 500% up to more than 2,000%.

Rare earths are a group of 17 metallic elements that are used in a variety of energy technologies, including electric vehicles and lighting. Although they are found in many countries, mining is not economically viable except in concentrated deposits. As a result, industry entrants such as U.S.-based Molycorp, Inc. have been largely unsuccessful at gaining a significant market share. Some experts claim that there is actually a worldwide surplus in rare earths—but that China’s control over market prices and supply is where the real threat lies.

Role in Lighting

In 2013, my colleague Richard Martin blogged about a new research lab called the Critical Materials Institute (CMI). This lab, created by the U.S. Department of Energy, is dedicated to averting supply crunches of rare earth elements. In its first year, CMI produced 11 inventions, all of which aim to improve extraction processes and recycling techniques to assure the availability of rare earths and other energy technology materials.

Phosphors are used in LEDs to convert the blue light produced by high-intensity LED chips into the white light demanded by lighting applications. To accomplish this conversion, the phosphors are mixed with various rare earth elements.

Another effort to ease the supply crunch is the European Union (EU)-funded NEWLED project, launched in early 2013, that seeks to develop LEDs with reduced or eliminated amounts of phosphor. A number of techniques exist to create white LEDs without phosphors, though none have yet matched phosphor-based LEDs in cost. The use of rare earths in lighting applications has actually declined as part of the shift to LEDs, which use less rare earth materials than fluorescent lamps.

Easing Restrictions

In an attempt to counteract China’s market position, rare earth startups have been popping up across the United States, as well as in Australia, Sweden, and Brazil. These startups hope to break China’s monopoly rare earth materials, but this effort will likely take several decades, at least, due to the economic viability and technological challenges of extraction. Additionally, in both 2011 and 2013, Japan announced the discovery of massive deposits of rare earths on the ocean floor, but has indicated no movement to develop or extract these resources.

Another option that is gaining traction is recycling rare earth materials from used products. At this time, recycling materials is just as expensive as mining the elements, but researchers across the globe are working to improve the recycling process. In particular, fluorescent bulbs are a promising candidate for recycling, and some companies have begun to recover the rare earth materials from these bulbs.

Unfortunately, some experts believe the end of China’s quota will have little practical effect on the market and that Chinese suppliers will retain control over the supply chain of rare earth materials. This concern is compounded by the fact that no other countries currently have well-established rare earths mining operations.

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In December, Boston’s Green Ribbon Commission (GRC) Healthcare Working Group published an energy profile of 22 million SF of metro Boston hospitals between 2011 and 2013. The report found that, as a result of energy efficiency and conservation measures, Boston hospitals have reduced energy use by 6% while expanding facility square footage. The study utilized over 18,000 energy and greenhouse gas records based on U.S. Environmental Protection Agency (EPA) Portfolio Manager data.

One important output of the study is an energy database, the first of its kind in the nation. The database contains data tracking of different hospital and healthcare system progress toward greenhouse gas reduction goals. The goals, laid out by the GRC, are a sectorwide 25% reduction in greenhouse gas emissions by 2020 and 80% by 2050. Hospitals are the second-highest user of energy among all building types in terms of energy intensity, and healthcare organizations spend nearly $8.8 billion annually on energy. In other words, efforts to reduce energy consumption across the healthcare system will pay outsized benefits.

In Wisconsin, Gundersen Health System recently achieved energy independence, producing more energy than it consumes. The system, which includes hospitals, medical clinics, nursing homes, and additional health facilities, set a goal 6 years ago to reduce energy consumption and increase renewables production. Achieving energy independence exceeds the initial goal, and Gundersen has also reported annual savings of approximately $2 million, as well as energy efficiency improvements of more than 40%.

Federal Programs

In the last few months of 2014, several federal initiatives and studies dealing with energy in hospitals and the healthcare sector were announced.

In October, the U.S. Department of Energy announced $9 million to encourage investment in energy reduction technologies for deployment in commercial buildings, including hospitals. This announcement supports the Obama administration’s effort to double energy productivity by 2030 and reduce overall carbon emissions in commercial buildings.

In mid-December, the White House released a report with guidelines to help the healthcare sector become more resilient in the face of climate change and already-high operations costs. The average hospital spends approximately $675,000 on annual energy costs, according to the 2003 Commercial Building Energy Consumption Survey (CBECS). The CBECS data showed that hospitals greater than 200,000 SF consumed 4.3% of the total commercial sector energy used in 2003, but accounted for less than 2% of all commercial floor space. The White House report outlines specific technologies that can help healthcare systems, including combined heat and power and fuel cells.

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In November, Amazon made a commitment to power its infrastructure with 100% renewable energy over the long term. Among tech companies, Amazon is late to the game in announcing its sustainability goal; Apple, Google, and Facebook had already released similar pledges over the past few years. Although cloud computing is more environmentally friendly than previous computing technologies, according to Amazon, a “significant amount of unused server capacity and wasted energy consumption” still occurs when powering data center infrastructure.

Since 2008, businesses and corporations around the world have begun to more actively pursue sustainability initiatives. Between 1992 and 2012, the number of corporations worldwide issuing corporate social responsibility (CSR) reports jumped from 26 to around 7,500.

Fortune 500 Leads the Way

Many of the leaders in corporate sustainability are part of the Fortune 500. In 2013, 43% of Fortune 500 companies had established goals for greenhouse gas (GHG) reductions, energy efficiency, renewable energy, or some combination of the three, and 60% of Fortune 100 companies had set sustainability targets. Although large corporations have made progress in establishing sustainability initiatives, only 75 of the Fortune 500 had specific energy efficiency targets in place by 2013. GHG reduction targets made up the greatest share of climate and energy initiatives.

Companies with long-standing commitments to reducing energy use have already seen energy and dollar savings from these initiatives. Walmart, for example, laid out plans in 2013 to save $1 billion globally per year through energy efficiency and renewable energy programs. The company has a long-term aspirational goal to achieve 100% renewable energy. In the shorter term, by the end of 2020, Walmart aims to reduce emissions intensity by 30% from 2010 levels and produce or procure 7 billion kWh of renewable energy worldwide.

The Trouble with Long Term

Kohl’s is another leader in corporate sustainability efforts. It has been implementing green building methods since 2005, and it had 432 LEED-certified stores as of June 2014, representing a full 37% of the company’s 1,160 stores across the United States. The 432 stores represent a total floor space of 35,616,240 square feet. Kohl’s plans to reduce absolute emissions and emissions intensity on a per-square-foot basis by 20%, both by 2020, compared to 2010 levels.

Although the growing prevalence of CSR and sustainability goals is encouraging, broad long-term goals have raised concern from some environmental groups. Setting goals without defined milestones makes it more difficult to hold companies accountable for the clean energy initiatives they have in place. Many companies, Amazon included, have not specified a roadmap to achieve their energy goals – an obvious next step to ensure those goals are achieved. Publicly committing to a clean energy future is only a first step.